Celgene's Drug Pipeline News Soothes Investor Worries


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Celgene ( CELG ) has been giving investors good news lately, after a long stretch of giving them heartburn.

The biotech earlier this month reported positive trial results for its immunology drug candidate apremilast, one of several Celgene is hoping will fill out a portfolio still dominated by its blockbuster cancer drug Revlimid.

The results came from three late-stage studies Celgene is conducting that test apremilast on psoriatic arthritis sufferers. The company already reported good results from one of them in July, and the other two showed similar improvements in symptoms and physical functions among subjects.

Celgene plans to file an application for approval with the FDA in early 2013, and in Europe in the second half of the year. It's also investigating the use of apremilast for other immunological disorders such as ankylosing spondylitis (a type of spinal arthritis) and a rare syndrome called Behcet's disease.

But all these conditions are considered to be among the "smaller indications" for apremilast, says Morningstar analyst Karen Andersen. The bigger prizes are psoriasis and rheumatoid arthritis, two markets already inhabited by some of the world's top-selling drugs, includingAbbott Laboratories ' ( ABT ) Humira,Johnson & Johnson 's ( JNJ ) Remicade andAmgen 's ( AMGN ) Enbrel.

Clinical Trials

Celgene is conducting clinical trials testing apremilast on these diseases, but they aren't as far along as the psoriatic arthritis trials. Andersen said if all goes well, it could make $1 billion a year by 2020, but she offers only a 50-50 chance of that happening.

ISI Group analyst Mark Schoenebaum said in his weekly videocast to clients Sept. 7 that he also had low expectations for apremilast, but he's starting to "turn the corner" on the drug.

"Even if you aim towards the low end of expectations, this has the potential to be a pretty big drug," he said. "And I've had some conversations with the CFO of the company, and I no longer think this will require a giant marketing expense."

However, both analysts said the data so far released have been sketchy. The full report will be made at the American College of Rheumatology's annual meeting in November, which will give them a better idea of the potential market.

The positive news on apremilast lifted Celgene's stock, which since April has suffered a series of body blows. First-quarter earnings missed analysts' expectations for the third straight time, sending shares on a long-term slide. But the biggest hit came in June, when the company withdrew its application for a new Revlimid indication in Europe.

Celgene's goal was to expand Revlimid's use in the complex treatment of the blood cancer multiple myeloma. Normally, it begins with doctors taking a group of blood-producing stem cells from the patient's body, which are then stored and put back into the patient after a round of chemotherapy. Celgene has been pushing for Revlimid's use as a maintenance therapy after this point, regardless of whether the patient relapses.

In the U.S., it's already used at various stages of treatment because of doctors' relative freedom to prescribe drugs for "off-label" uses. The European authorities are a lot more stringent about these things, so Celgene and the European Medicines Agency have been in a long wrangle over the drug's safety profile. A small number of patients in the trials developed second cancers, believed to have been caused by exposure to Revlimid.

Though the idea of a cancer-causing cancer drug might sound odd, it wasn't a total shock since the traditional myeloma treatment, thalidomide (which Celgene also makes), has long been known to increase the risk of cancer. The important question is whether the risk of this is great enough to outweigh the known benefits against the original cancer.

A year ago, a panel advising the EMA determined that the risk-benefit profile was positive. But that determination was about Revlimid in its current use, not for maintenance. The EMA's Committee for Medicinal Products for Human Use ( CHMP ) was apparently still concerned about the effects of longer-term use because when Celgene withdrew its application on June 21, it said it would "resubmit with more mature data, which allows CHMP to conclude a clear benefit/risk ratio."

More Time

Cowen analyst Eric Schmidt told IBD in July, "I think also the agency wants to see the trends favoring overall survival persist with time, that they're not causing early mortalities. We don't know if it'll be another six, 12 or 18 months, but if data mature in a fashion that seems acceptable, they can probably get back on track."

Meanwhile, Celgene is working to expand its hematology franchise. Vidaza, a drug treating a blood disorder called myelodysplastic syndrome, was first approved in the U.S. in 2004, but is still expanding into new markets globally. In the second quarter of this year, its sales rose 24% over the year-ago quarter.

Celgene is also developing another multiple myeloma drug called pomalidomide, which is currently in phase-three testing for treating refractory cases that haven't responded to other treatments.

Analysts say that Celgene isn't expecting it to turn into the next Revlimid, but they do expect it to do well.

"I think that's another billion-dollar drug, and it's more likely (than apremilast) to make it to market," Andersen told IBD.

Despite its stock troubles, Celgene has remained a solid growth company, with double-digit quarterly increases in both profit and sales for many years. Still, the forecasts show why Celgene is looking for new revenue streams. Analysts expect profit this year to rise 28% to $4.87 a share, but see growth easing to 13% next year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas
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